By Jose del Rosario

Mobile-satellite services traditionally have focused on maritime and aeronautical markets where the business case for tapping these sectors is compelling. London-based Inmarsat was created as an intergovernmental organization specifically to meet the needs of the maritime and aeronautical sectors because terrestrial technologies are impractical, inadequate and technically challenged to fill or address the communications needs of airborne and sea-based users.

Satellite-based services have filled this niche and they are unlikely to be rivaled seriously by terrestrial-based services that lack the same coverage capabilities. This prospect should assure mobile-satellite providers because steady streams of revenue and growth can be attained without serious competitive threats from terrestrial platforms.

However, competitive pressures have emerged within the mobile-satellite market. Iridium and Globalstar as well as AcES and Thuraya are tapping the maritime and aeronautical markets. They have grown and taken market share from Inmarsat, which still gains its core revenue from the maritime market. However, maritime accounted for close to 70 percent of Inmarsat’s revenues in 1999 but only 51 percent in 2003. The trend is likely to continue. Moreover, Connexion by Boeing and Tenzing are exerting further pressure on once relatively “uncompetitive” sectors previously dominated by Inmarsat.

As competition within the aeronautical and maritime markets heats up, Inmarsat has targeted revenue growth in the land-mobile sector. Inmarsat’s revenues and units in-service have risen since 1999, particularly in the land-mobile market. Equally important is the shift and revenue growth from voice to data revenues, which should continue. Not surprisingly, Inmarsat’s Regional BGAN (R-BGAN) service has been marketed almost exclusively to the land mobile segment. This strategy will likely be implemented when BGAN is launched based on the I4-satellite constellation in 2005.

Inmarsat operates approximately 4,300 R-BGAN units; the installed base of R-BGAN terminals is approximately 6 percent of its total land mobile units. The launch of Inmarsat’s I4 fleet and the introduction of BGAN, which improves throughput from the current R-BGAN’s 144Kbps shared channel to 432 Kbps coupled with more aggressive pricing plans for equipment and service, should lead to higher uptake from end users. BGAN services also will serve new applications, such as telemedicine for village doctors. By 2010, Northern Sky Research forecasts close to 50,000 in-service units that should compose around 20 percent of all Inmarsat land mobile units.

Marketplace Shifts

What caused the marketplace shift? The most obvious trend is the increasing assimilation of the Internet in both professional and personal communications. Another factor is the growing mobility of the global workforce. Mobile broadband networks are implemented terrestrially in 3G, planned for 4G, and are providing a bigger “pipe” for the transmission of voice, data and video services to mobile devices. Within the satellite industry, remote locations in the land-mobile sector have spurred implementation of mobile- satellite services where terrestrial technologies are impractical. As remote locations are assimilated into the global village, demand for land-based mobile satellite services will grow. Inmarsat’s R-BGAN service has benefited from these market demand trends.

Will these trends continue? In a recent study, The Portable Internet, the International Telecommunication Union (ITU) wrote that the “portable Internet” is a “disruptive” technology. A revolution in wireless technologies has transformed voice services to the point that mobile voice users outnumber fixed-line voice users. A transformation of the data industry will follow in the next decade. The ITU also found that if the “permeability of portable Internet technologies” stays on pace, societal changes would evolve at an equally rapid pace. For the satellite industry, rapid evolution is warranted to tap the opportunities the portable Internet holds. Foremost is that ownership of portable Internet devices and the accompanying service fees must be affordable for mobile-satellite technologies to go from niche to mainstream.

For land-mobile services, the digital divide is beginning to be bridged. The digital gap between mobile users in developing and developed countries has narrowed during the last 10 years. If the divide, including the Internet gap, is to be truly bridged, deployment of mobile systems is the answer.

There still is much work to be done in bridging the digital divide for Internet usage. Within the satellite industry, the business opportunities presented by mobile broadband applications have led to such next-generation services as the coming launch of Inmarsat’s I4 satellites that will use L-band frequencies. Those satellites will tap such vertical markets as commercial shipping, oil & gas and the cruise-ship industry. The satellite industry is beginning to evolve with new services, including Connexion by Boeing and Tenzing, which are aimed at tapping high-speed Internet access and video services users on commercial jets.

Inmarsat has the benefit of hindsight from its work in the maritime market.

Jose del Rosario is senior analyst and regional director for the Asia Pacific at Northern Sky Research. He can be contacted by e-mail at [email protected].